AIG Warned of 'Crisis' if Government Didn't Help

An AIG report to the Treasury Department last month warned that if the government didn't come to its rescue again, its collapse would trigger a "chain reaction of enormous proportion" that would "potentially bankrupt or bring down the entire system" and make it impossible for AIG to repay the billions it already owed the U.S. government.

Four days later, AIG was given $30 billion in federal aid on top of the $130 billion it had already received.

AIG warns in its report of the "systemic risk" that a potential collapse posed. It describes a "systemic risk" as one that "could potentially bankrupt or bring down the entire system or market."

The company said, "What happens to AIG has the potential to trigger a cascading set of further failures, which cannot be stopped except by extraordinary means."

"The inability of AIG to immediately secure additional assistance from the Federal Reserve and the Department of the Treasury threatens not only AIG's sales process, but also consumer and business confidence around the world," it said.

The report referred to the unexpected downward economic spiral after the Fed allowed Lehman Brothers, the giant investment bank, to collapse last fall. AIG said the damage to credit market would "dwarf the Lehman fallout."

The Treasury Department told ABC News it would have no comment on the report, and the White House referred questions to the Treasury Department.

Late today, AIG released a more recent version of the draft, dated March 6. The language in it was substantially the same as in the copy obtained earlier by ABC News.

The company points out in the report that it operates in 140 countries and is the largest insurer in the Mideast, Southeast Asia, Hong Kong, the Philippines, Thailand and Japan. It argues that its failure would create a "crisis of confidence" worldwide.

Fed Feared AIG's Ripple Effect

The struggling insurance behemoth also describes itself as the largest retirement-services provider for the American education and health-care systems in the United States.

AIG warned the Treasury Department that it was even more crucial for it to be rescued in February than it was late last year when the Bush administration came to its aid with tens of billions of dollars.

"Permitting AIG to fail would be even more serious today than in September, especially in view of the support of the U.S. government," the report said. "Public confidence in financial institutions is at a nadir and it is questionable whether the economy could tolerate another shock to the system that a failure of AIG would produce."